00:00Bloomberg's Aaron Weinman joins us now for more. So Aaron, talk to us about why this is happening
00:06now. I mean, you could make the case that credit markets have been hot. They've been hot for a
00:10while now. So why are we seeing this sort of rush to reprice right now? So there's multiple factors
00:15at play here, Katie. But at the heart of the matter is that there is very little what they
00:20call new money in the market. And what that primarily means is money that's being supported
00:26by mergers and acquisitions. So because that little new money flow is coming through, or not
00:32coming through, I should say, that's leaving investors very little choice but to continue
00:36to play in the existing loans they hold. And against the backdrop of very strong credit markets,
00:42the better credits or the better companies or borrowers, whatever you'd like to call them,
00:46are in a position where they can lower their borrowing costs and reprice their loans by 25
00:51or even 50 basis points in some instances. I mean, it's interesting because hearing you talk,
00:56it almost sounds like lowering borrowing costs, that's very nice. I can understand why that's
01:01attractive. But it's not the whole story here.
01:05No, not at all. So the reason why they can lower their borrowing costs so much is not just
01:10because there's lack of other opportunities to invest in, but they have a lot of money,
01:15the investors have a lot of money that they need to put to work. Primarily what that means is the
01:20CLO buyer, which is the largest buyer of a leveraged loan, has a lot of vehicles that they
01:26have stocked or warehoused, to use their terms, and that money needs to find a home. In the case
01:33where there's very little new money opportunities, like dividends or acquisition-related financings,
01:38repricings is another option that they have. It's not the most lucrative because it means that
01:43their coupon's getting clipped. But for the borrower, it means that they can lower their
01:47interest payments every quarter. Interesting. And I mean, not that you would expect perfect
01:52harmony here, but it sounds like that's a little bit of tension here between the investors and I
01:57would imagine the banks as well, and the firms and their owners who are actually doing these
02:02repricings. There is a little bit of tension in the sense that obviously the bankers and the
02:09investors are not making the kind of money that they would usually make. So for an investor,
02:14a higher coupon means they get more money for their vehicles and their underlying investors.
02:20And for the banks, these repricings don't generate the kind of fees that they would typically generate
02:26if they are financing or underwriting an acquisition or paying a dividend. Those deals are far more
02:32lucrative. Their fees are higher. And as you know, this is Wall Street. Everyone wants to make a bit
02:39more money. And repricings are not the most lucrative form of leveraged finance, to put it
02:45lightly. And what's the expectation here? I mean, could we see more of this activity pick up when it
02:52comes to M&A and some of the other activities that can go on? Or is the expectation here is
02:56that
02:57this wave of repricings that we're seeing, these refinancings, is going to continue?
03:01The general consensus is that's the latter. So there's a lot of refinancings that need to occur
03:06between now and 2028. So there's debt that needs to be not only repriced, but also refinanced,
03:13perhaps in the bond or the loan market. As far as M&A is concerned, it's to be determined whether
03:20that's going to pick up. The consensus view is that it's expected to, but there's still some laggards in
03:27the background, such as private equity and the valuations of their own portfolio companies.
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